Businessweek

Watsco, Inc. operates as a distributor of air conditioning, heating and refrigeration equipment and related parts and supplies (HVAC/R) in the HVAC/R distribution industry. The company’s operations are primarily within the U.S. and Puerto Rico. As of December 31, 2012, the company operated from 573 locations in 38 U.S. states, Canada, Mexico and Puerto Rico with additional market coverage on an export basis to Latin America and the Caribbean, through which it serves approximately 50,000 contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating and refrigeration systems. Products The company sells a line of products and maintains a mix of inventory to meet its customers’ immediate needs and intends to provide products a contractor would require when installing or repairing a central air conditioner, furnace, or refrigeration system on short notice. The company distributes various products that consist of equipment, including residential central air conditioners ranging from 1-1/2 to 5 tons, gas, electric, and oil furnaces ranging from 50,000 to 150,000 British thermal units, commercial air conditioning and heating equipment and systems ranging from 1-1/2 to 25 tons and other specialized equipment; parts, including replacement compressors, evaporator coils, motors, and other component parts; and supplies, including thermostats, insulation material, refrigerants, ductwork, grills, registers, sheet metal, tools, copper tubing, concrete pads, tape, adhesives, and other ancillary supplies. The company also sells products to the refrigeration market. These products include condensing units, compressors, evaporators, valves, refrigerant, walk-in coolers, and ice machines for industrial and commercial applications. It distributes products manufactured by Copeland Compressor Corporation, a subsidiary of Emerson Electric Co.; E. I. Du Pont De Nemours and Company; Mueller Industries, Inc.; Owens Corning Insulating Systems, LLC; and The Manitowoc Company, Inc. Joint Ventures The company has a joint venture with Carrier Corporation (Carrier), which it refers to as Carrier Enterprise I, in which Carrier contributed 95 of its company-owned locations in 13 U.S. Sun Belt states and Puerto Rico, and its export division in Miami, Florida, and the company contributed 15 locations that distributed Carrier products. In 2012, the company exercised its option to acquire an additional 10% ownership interest in Carrier Enterprise I, which increased its ownership interest to 70%. The company has an option to purchase from Carrier an additional 10% interest in Carrier Enterprise I, which becomes exercisable in July 2014. The company also has a second joint venture with Carrier and completed two additional transactions. Carrier contributed 28 of its company-owned locations in 8 Northeast U.S states, and the company contributed 14 locations in the Northeast U.S. The company purchased Carrier’s distribution operations in Mexico, which included seven locations. Collectively, the Northeast locations and the Mexico operations are referred to as Carrier Enterprise II. The company has a 60% controlling interest in Carrier Enterprise II, and Carrier has a 40% noncontrolling interest. In 2012, the company formed a third joint venture, which it refers to as Carrier Enterprise III, with UTC Canada Corporation, referred to as UTC Canada, an affiliate of Carrier. Carrier contributed 35 of its company-owned locations in Canada to Carrier Enterprise III. The company has a 60% controlling interest in Carrier Enterprise III, and UTC Canada has a 40% noncontrolling interest. Suppliers The company has relationships with Carrier; Rheem Manufacturing Company; Goodman Manufacturing Company, L.P.; Nordyne Corporation; Emerson Electric Co.; The Manitowoc Company, Inc.; and E. I. Du Pont De Nemours and Company, each of which is a primary manufacturer of HVAC/R products in the U.S. Business Strategy The company has a ‘buy and build’ strategy that has produced substantial long-term growth in revenues and profits. The ‘buy’ component of the strategy